Biden administration wants more crypto enforcement, digital asset rules

Souvenir tokens representing cryptocurrency networks Bitcoin, Ethereum, Dogecoin and Ripple plunge into water in this illustration taken May 17, 2022. REUTERS/Dado Ruvic/Illustration

Sept 16 (Reuters) – U.S. government agencies must double down on enforcement of the digital asset sector and identify gaps in cryptocurrency regulation, the Biden administration said in reports published on Friday.

The Treasury Department will also lead a group of government agencies that will consider a central bank digital currency, although the White House stopped short of backing a digital dollar.

The reports were issued in response to an executive order US President Joe Biden signed this year “to ensure the responsible development of digital assets.”

“Innovation is one of the hallmarks of a vibrant financial system and economy, but as we have painfully learned from history, innovation without adequate regulation can result in significant disruption and harm to the financial system and individuals,” Treasury Secretary Janet Yellen told reporters.

The reports urged regulators such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to issue guidance and rules on ecosystem risks for digital assets, including the potential for cryptocurrencies to be used in money laundering or fraud.

The White House also said Biden would consider asking Congress to amend the Bank Secrecy Act (BSA) to apply to digital asset service providers, including cryptocurrency exchanges and platforms for non-fungible tokens, or NFTs. The BSA requires lenders to report suspicious transactions to the Treasury.

Biden will also consider recommendations from agencies to create a federal framework to oversee non-bank payment providers.

Cryptocurrencies soared past $3 trillion in value last year, but the sector has stumbled in recent months as investors have pulled out of risky assets amid rising interest rates.

Brian Deese, the director of the National Economic Council, said that cryptocurrencies risk harming financial stability and national security without proper oversight.

“Regulation of cryptocurrencies is necessary if digital assets are to play the role we believe they can in fostering innovation and supporting our economic and technological competitiveness,” he said.

Reporting by Hannah Lang in Washington; Editing by Michelle Price and Josie Kao

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